The Shopping-Mall Crisis Is Getting More Ominous

More than two dozen malls have
shut down in the last four years and another 60 malls are on the
brink of death, The
New York Times reports, citing Green Street Advisors,
a real-estate and real estate investments trust analytics
firm.

The firm
predicted last year that about 15% of US malls would fail or
be converted into nonretail space within the next 10 years. That
was an increase from two years earlier, when the firm said that
10% of malls would fail or be converted.

Retail consultant Howard Davidowitz expects as many as half of
America's 1,200 shopping malls to fail within 15 to 20 years. He
predicts that only upscale shopping centers with anchors like
Nordstrom, Saks Fifth Avenue, and Neiman Marcus will survive.

"Middle-level malls are disappearing," said Davidowitz, chairman
of Davidowitz & Associates, Inc., a national
retail-consulting and investment-banking firm. "Developers are
trying to do all kinds of things to save them, but at the end of
the day, half of them are going to close."

Even some luxury shopping
centers are hurting. The formerly upscale White Flint Mall,
for example,
is nearing demolition. The 874,000-square-foot shopping
center is located in the affluent suburbs of Washington,
D.C., and once housed high-end department stores such as
Bloomingdales, I. Magnin, and Lord & Taylor.

Many malls are suffering
because of recent widespread closures among major department
stores, such as Sears, J.C. Penney, and Macy's. Once mall anchors
close, it can be difficult for mall owners to find a tenant to
replace them.

That puts pressure on other
mall-based retailers such as Radio Shack, Abercrombie &
Fitch, Aeropostale, and Delia's.

Radio Shack wants to close a
quarter of its 4,000 stores and Aeropostale has announced plans
to close 240 of its locations. Abercrombie has closed 180 stores
since 2009, and Delia's is closing all 92 of its stores as part
of its liquidation.

A mall's health is measured by
its vacancy rate, or how much retail space it has unused.

Of the 1,200 shopping malls in the US, 80% are considered healthy
with vacancy rates of 10% or less, according to The Times'
report, which cited data from CoStar Group. That's down from 94%
in 2006.

Nearly 15% of malls have vacancy rates of 10% to 40%, according
to the data. The malls in
the most trouble are the 3.6% that have vacancy rates of more
than 40%.

"The big question is, how many
malls are there going to be in five years?" Bradley Snyder,
executive managing director for Boston advisory firm Tiger
Capital Group, told
Bloomberg. "It’s certainly a concern for landlords, with the
entire sector being impacted."